Kazakhstan Monetary Policy September 2019

The National Bank of Kazakhstan decided to raise the base rate by 25 basis points to 9.25%, keeping an interest rate corridor of plus or minus 1.0 percentage point around the base rate, at its latest monetary policy meeting on 9 September. Around half of all analysts had expected a hike.

In a bid to curb rising inflationary pressures fueled by strengthening domestic demand and shore up the tenge, the Bank opted to increase rates. Strong government spending has shored up real wage growth; this, coupled with robust consumer lending, is driving up consumption and in turn prices. Inflation inched up to 5.5% in August (July: 5.4%), marking the highest reading since September 2018. Economic activity has grown at a faster pace than expected by the Bank, with the short-term economic indicator up 4.4% in January–July, the swiftest year-to-date expansion. Large-scale infrastructure and investment projects, including the TCO expansion and Saryarka gas pipeline have boosted demand for capital goods, with the rising cost of imports adding to price pressures.

Devoid of substantive forward guidance, the communiqué indicated only that future decisions will be guided by the Bank’s price projections, which currently see inflation hovering around the upper bound of the 4.0%–6.0% target band. The Bank did, however, note that upside risks to the inflation outlook stem from slowing global growth and the ongoing trade dispute.

The next meeting is scheduled for 28 October 2019.

FocusEconomics panelists are currently factoring in the latest decision into their projections.

At an emergency meeting on 27 April, the National Bank of Kazakhstan left the base rate at 9.50% and the interest rate corridor at plus or minus 2.0 percentage points, after having delivered an emergency 250 basis point cut in their previous meeting earlier this month.
The challenging economic conditions posed by the Covid-19 pandemic and the crash in oil prices prompted the Bank to maintain a dovish bias and stand pat despite mounting price pressures.

At an emergency meeting on 3 April, the National Bank of Kazakhstan slashed the base rate to 9.50% from 12.00%, while also expanding the interest rate corridor to plus or minus 2.0 percentage points, from a previous interest rate corridor of plus or minus 1.5 percentage points.

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